Summaries of health policy coverage from major news organizations

Lawsuit Alleges PBM Misused Leftover Medications

A recently disclosed lawsuit, filed in December 2003 by four former employees of pharmacy benefit manager Caremark Rx, alleges that the company restocked leftover prescription drugs and resold them to customers, including CalPERS, the Sacramento Bee reports. Caremark in return filed a lawsuit in 2004 alleging that two of the whistleblowers stole company documents containing confidential patient information and released them to third parties, the Bee reports.

The initial lawsuit was filed in December 2003 but remained sealed until June 22. Caremark disclosed the case on Aug. 8 in a quarterly financial report filed to the Securities and Exchange Commission, the Bee reports.

The employees' lawsuit alleges that Caremark defrauded CalPERS by falsifying records about slow deliveries. The suit also alleges Caremark secretly canceled or delayed orders for medications, then altered its records to avoid penalties for not meeting time requirements laid out in its CalPERS contact.

The suit accuses Caremark of engaging in "offensive, illegal and potentially dangerous practices," according to court documents. It claims Caremark did not inspect or test the drugs before they were resold as part of an effort to help increase profit.

Caremark Lawsuit

The suit filed by Caremark claims two of the former employees stole the confidential internal documents and seeks to have the documents returned.

Michael Leonard, an attorney for the former employees, said they do not deny taking the documents but were "entitled to do so to prove [their] case."

CalPERS Reaction

CalPERS spokesperson Pat Macht said that CalPERS officials learned of the lawsuit about 18 months ago and that CalPERS previously was aware of "benign restocking" cases in which Caremark reused mail-order drugs that were returned to the PBM unopened after being delivered to the wrong address. CalPERS auditors are investigating the lawsuit's claims, Macht said.

CalPERS health benefits spokesperson Clark McKinley said the pension fund is working with the office of Attorney General Bill Lockyer (D) to gather information about the allegations.

Caremark is among the bidders vying for a CalPERS PBM contract to be awarded in June.

Caremark Defense

In the SEC filing, Caremark executives said they have a "meritorious defense to all legal claims" but stated that there was no guarantee the suit would not "have a material adverse effect on [Caremark's] operating results and financial condition."

Caremark spokesperson David Bassiouni declined to comment because the case is ongoing (McIntosh, Sacramento Bee, 8/22).

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